SAFAKNA TURKEY – The Monetary Policy Committee (Council) of the Central Bank decided to keep the one-week repo auction rate, which is the policy rate, at 9 percent.
The Monetary Policy Committee explains:
“The first published data indicate that recession fears in the economies of developed countries remain due to ongoing geopolitical risks and rising interest rates. Although the negative effects of supply restrictions in some sectors, especially in staple foods, have been reduced thanks to the strategic decision tools developed by Turkey, producer and consumer inflation still remains high internationally. The implications of high global inflation for inflation expectations and international financial markets are being carefully monitored. Depending on the economic outlook, which differs between countries, the divergence in the steps of monetary policy and communications of the central banks of developed countries continues to widen. It was noted that efforts to find solutions using new supporting practices and tools developed by central banks to increase uncertainty in financial markets continue. In addition, financial markets have begun to reflect on expectations that central banks, which have raised interest rates amid rising recession risks, will soon end their rate hike cycles.
Strong growth was achieved in the first three quarters of 2022. On the other hand, leading indicators for the last quarter of the year indicate that the slowdown in growth due to weakening external demand continues. However, the impact of demand-driven external pressure on manufacturing on domestic demand and supply potential remains limited so far. Employment growth is more positive than in comparable countries. When looking at employment generating sectors, it can be seen that the growth momentum is supported by structural advantages. While the share of sustainable components in growth is increasing, the strong contribution of tourism to the current account balance, which exceeds expectations, remains. In addition, high energy prices and the possibility of a recession in major export markets remain current account risks. For price stability, it is important that the current account balance become constant at a sustainable level. The growth rates of loans and the development of financial resources achieved by economic activity in accordance with its purpose are carefully monitored. The Council will resolutely continue to use its instruments to support the effectiveness of the monetary transmission mechanism and will align the entire set of policy instruments, especially funding channels, with the goals of liraization. The policies to be implemented will be announced in detail in the Monetary and Exchange Rate Policy for 2023, which will be announced in December.
In growth there is inflation; The lagged and indirect effects of rising energy costs caused by geopolitical events, pricing effects far from economic fundamentals, and strong negative supply shocks caused by rising global prices for energy, food and agricultural commodities have been effective. The Council foresees that the process of disinflation will begin with the restoration of global peace, as well as with steps taken and strongly implemented to strengthen sustainable price stability and financial stability. The effects of lower external demand on aggregate demand and production conditions are being carefully monitored. At a time of increasing uncertainty about global growth and geopolitical risks, it is imperative that financial conditions are supportive in terms of sustaining the acceleration in industrial production and employment growth, as well as the sustainability of structural supply growth and investment potential. In this regard, the Council decided to keep the discount rate unchanged. The Committee assessed the current discount rate at a sufficient level, taking into account the growing risks for global demand. To institutionalize price stability on a sustainable basis, the CBRT continues to review a comprehensive policy framework that encourages continued and enhanced liberalization across all policy instruments. The credit, collateral and liquidity policies that have already been assessed will continue to be used to improve the effectiveness of the monetary policy transmission mechanism.
In line with its primary goal of price stability, the CBR will resolutely continue to use all the tools at its disposal as part of its liraization strategy until there are strong indicators pointing to a permanent decline in inflation and a medium-term target of 5 percent. Achieved. The resulting stability in the overall price level will positively impact macroeconomic stability and financial stability through lower country risk premiums, continued reverse currency substitution and an upward trend in foreign exchange reserves, and a continued decline in financing costs. In this way, a suitable basis will be created for continued growth in investment, production and employment in a healthy and sustainable manner.
The Council will continue to make its decisions in a transparent, predictable and data-driven environment.
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